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As Digital First Media Announces Its Paywalls, 41% of US Dailies Will Soon Have Them

Even the paywall contrarians are coming around. John Paton’s Digital First Media will announce today its adoption of metered paywalls at all its Media News and Journal Register sites. That’s more than 75 papers, including big ones in Denver, San Jose, L.A., Salt Lake City (among the Media News brands) and lots of smaller ones throughout the country.

By my count, that will mean that 41% of U.S. dailies will have restricted digital access, aka paywalls, in place, as soon as all the logistics of implementation, still underway at many places are finished. At Gatehouse, that’s 80 smaller dailies. At Gannett, that’s now all 81 of its community dailies (and not USA Today). Advance, I believe, is the only remaining large chain to offer unfettered free digital access, a plan that I’ve described as misguided.

That’s an astounding number. Let’s recall that the New York Times went up with its metered paywall, borrowing the idea tested and honed by the Financial Times, just three years ago. There was a lot of reaction to its 2010 announcement that would do so — the Times Select ghost was trotted out — and then there was the religious reaction. Internet fundamentalists claimed that a erecting a paywall showed just how clueless and out of touch the Times was; didn’t it know it had to play and figure out a business model within the Church of Free, how God intended all news content to be offered up to the world forever on. Many of those early critics have recanted, and acknowledged the limits of their early orthodoxy.That’s good; we all have to keep learning.

John Paton is one of them.

“It’s a tactic, not a strategy,” he told me today. He’s a smart guy and puts the move in context in his own blog post, to be published shortly. The new program replaces 23 partial paywall strategies, several hard paywalls and alternative solutions, with a single program company-wide.

On the details of DFM’s paywalls:

When: Over the next several months.

How: Press+ will power all of them.

Pricing and metering: All on All-Access basis, with market variations.

How it plays with Google Surveys: it won’t. DFM had been high on GCS (“The Newsonomics of Google Consumer Surveys“), but has pulled out of the program. Paton cites dwindling revenues and negative traffic impact.

“On paywalls: “I don’t think paywalls are the answer to anything. If we’re swapping out print dollars for digital dimes, I think paywalls are a stack of pennies. We might use the pennies in transition to get where we’re going.”

In short, those pennies matter. Circulation revenue was up 5% in the U.S. last year; I expect it to be up by that amount and more for 2013. Those are meaningful mounds of pennies, amounting to often a half a billion dollars for the industry. That’s why European dailies are now starting to strongly adopt the practice.

Paton likes to call paywalls a “tactic” rather than a strategy. I’m not sure that’s a meaningful distinction. Maybe “paywalls” are a tactic, but reader revenue is a strategy, and it’s one that makes as much philosophical sense as financial. Who better to pay most of the salaries of journalists than the people they write for? Isn’t that better than being largely beholden to more fickle commercial interests?

We come out of a world, in the U.S., where advertisers contributed 80% of the revenues and readers only 20%. By the end of this year, we’ll be up to close to 30% reader revenue, both because of paywalls and greater ad decline. The New York Times is already at 56% reader revenue; it’s crossed over, and it’s not only. Strong dailies like the Star Tribune are in the mid-40s. Expect much of the industry to share similar economics by 2017.

Yes, paywalls are just part of a new evolving news model, but they are an essential part. Even the digital-first John Paton agrees.

It will be hard to explain to people in 2020 how the early “online newspapers” were free for 15 years. Now the challenge is making them work, and offering the customers more for their money. That’s a big topic for 2014 and the years beyond.

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